In the matter of Lamo Holding B.V.

When sanctioning a scheme of arrangement, the court must identify the appropriate comparator and assess whether the scheme is one which an intelligent and honest member of the relevant class might reasonably approve. The court must also consider statutory compliance, fair representation, bona fide voting and any blot or defect.

Non-party shareholders or creditors may be heard where the scheme and a closely connected restructuring materially affect their interests, but they have no automatic right to adduce evidence or cross-examine witnesses. The court should assess the scheme on its merits and should not refuse sanction merely to compel further negotiations.

Lamo Holding B.V., a Dutch holding company, applied under Part 26 of the Companies Act 2006 for sanction of a scheme compromising liabilities owed to two classes of financial creditors. The scheme formed part of wider Dutch restructuring proceedings under the WHOA, including a proposed transfer of the Company’s shares and allocation of depositary receipts.

The Company’s shareholders opposed sanction. They contended that the proper comparator was an orderly solvent wind-down, which would produce a better return than the restructuring. The Company and supporting lenders argued that failure of the restructuring would lead to enforcement and insolvent liquidation. The court considered the shareholders’ standing, the comparator, fairness, statutory compliance and international effectiveness.

1. Outcome. The court sanctioned the scheme under section 899 of the Companies Act 2006. The statutory majorities were obtained, the meetings complied with the convening order, and the two creditor classes were properly constituted.
2. Applicable principles. The court applied the established scheme-sanction test: statutory compliance; fair representation and bona fide voting; whether an intelligent and honest member of the class might reasonably approve the scheme; and whether there was any blot or defect. The court remains slow to differ from an informed commercial majority, but does not merely register its decision.
3. Non-party objectors. Shareholders whose interests were materially affected by the scheme and connected WHOA restructuring had a sufficient interest to be heard. This did not confer an absolute procedural right to adduce evidence or cross-examine witnesses. The court could manage the hearing to avoid procedural unfairness and was not required to conduct a full trial of disputed valuation evidence.
4. Comparator. The relevant comparator was insolvent liquidation. The evidence showed that the restructuring had followed prolonged negotiations, the lenders had differing security and incentives, and failure of the restructuring was likely to lead to individual enforcement, a rush for priority and a possible domino effect. The court rejected the proposed orderly solvent wind-down as speculative.
5. Even if the comparator were uncertain, refusing sanction to force the parties into further negotiations would not be a legitimate or sensible use of the court’s powers. The court had to assess the scheme as presented.
6. The scheme was fair, contained no blot or defect, had a sufficient connection with England through the governing law of the financing documents, and was likely to be effective in the key jurisdictions of the Netherlands, Scotland and Singapore. The court also declared that the appointed foreign representative was validly authorised for the purposes stated in the sanction order.